Construction market picks up gradually

The construction sector is beginning to show small signs of improvement despite remaining "well inside recession territory".

According to the CIPS/Markit UK Construction PMI all three areas of UK construction (housing, commercial and civil engineering) recorded smaller contractions in output during April.

The report warned overall activity levels continued to "contract rapidly" with the housing sector still the worst performing of all sectors of the construction industry.

The PMI rose from 30.9 to 38.1 from March to April, with indices tracking trends rising also across the three sectors. The level of new orders to construction firms fell steadily in April, with respondents blaming "unfavourable market conditions, lacklustre demand and intense competition".

Roy Ayliffe, director at the Chartered Institute of Purchasing & Supply, said: "The darkness that has been gathering across the UK construction economy over the past thirteen months lifted slightly in April but, against a backdrop of ongoing market uncertainty, fewer new orders and fierce competition; blue skies are still a fair way off.

"Nonetheless, confidence in future sector performance improved. A number of purchasing managers also noted that previously postponed contracts were expected to recommence."

Optimism rose to the greatest level since last June, according to the survey, with business conditions expected to improve this year.

However, housing has been left weakened by falling prices and the unavailability of mortgage finance.

Gemma Wallace, economist at Markit Economics said: "The recession in the UK construction economy, which had been generally deepening, eased off sharply in April. The headline PMI rose to its highest level for seven months. It was another step in the right direction, but it will take a lot more to restore confidence, and therefore demand, in the sector – let alone to pre-crisis levels."

The report has been welcomed as a sign the construction sector is beginning to show tentative signs of recovery.

Royal Institution of Chartered Surveyors (Rics) chief economist Simon Rubinsohn said: "Construction output is still likely to post a double digit decline over the course of 2009 but the results of this survey allied to some signs of a gentle pick-up in activity in the housing market hold out the hope that that the building industry may begin to stabilise in the early part of 2010."